Is the Recent Retail Shrink Crisis as Bad as It Seems?

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With seemingly endless reports coming in about retail shrink each day, it feels like theft is out of control in America. Some of these recent reports include:

• Home Depot tracking down a crime ring
• San Francisco PD launching blitz operations against retail theft
• Mounting theft losses from shoplifting, flash mobs, and organized crime
• Numerous videos of flash mob robberies
• Las Vegas tackling organized retail crime

Target has recently announced the closure of nine stores and named retail theft as the culprit. Additionally, many retailers across all spectrums, including “Home Depot, Lowe’s, Dollar Tree, Dick’s Sporting Goods, and Ulta, have raised concerns about disappearing inventory, known as ‘shrink.’”

According to Newsweek, retail companies are now seeking additional police help, such as by asking them to record all details of any robbery. Meanwhile, law enforcement agencies in multiple states and counties are receiving grants or allocating funds to specifically target retail theft. California, for instance, recently made the “largest-ever investment to combat organized retail crime.”

The National Retail Foundation added that “retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire.” This is following the NRF’s last annual survey, which involved 177 retail brands and said that “when taken as a percentage of total retail sales in 2022, shrink accounted for $112.1 billion in losses, up from $93.9 billion in 2021.” That’s a 19.4 percent spike.

The survey stated that “internal (employee) theft reported in at 29% of shrink loss,” and “process, control failures and errors came in at 27%.” Their data also concludes that there is not much direct evidence that organized retail crime by itself has drastically increased compared to previous years, since 36% is attributed to external theft.

Some industry experts question the claims of retailers who argue that losses from shrinkage are significantly impacting their profits, with many believing “other factors are also at play,” according to The Washington Post. This skepticism arises especially when considering the current consumer trend of reducing nonessential expenditures and opting for more affordable alternatives in response to rising inflation. And earlier this year, Walgreens’ leadership revised statements from 2021, indicating that organized retail theft wasn’t the sole cause for shutting down five San Francisco locations.

FreightWaves reported that major companies such as Walmart and CVS have adopted unconventional and expensive strategies to tackle theft. Meanwhile, the NRF is urging Congress to allocate more federal resources to fight organized retail crime.

FreightWaves also explained that “some aren’t entirely convinced the retail theft is really that bad. Industry data on the problem is hard to solidify, and it hasn’t exactly shown a massive upswing in shrink either. Others say retail theft, while certainly an issue, might be overstated as an excuse to write off mediocre sales — or harebrained strategy shifts.”

The managing director at GlobalData Retail, Neil Saunders, told FreightWaves that retail theft is real but explained that it might also be a scapegoat for bad choices and supply chain issues. S&P Global Ratings retail analysts also added that retailers might be exaggerating their retail theft numbers this year as a result of failed inventory management and merchandise execution.

Whether or not retail theft is at the root of many retailers’ excuses to close up shop, one thing that does seem to be more unanimously agreed upon by experts is the severity of recent thefts. Ranging from flash mob burglaries to dangerous altercations between thieves and employees, theft seems to have escalated compared to years past and shouldn’t be ignored.